Long-term plan: recovery route

The NHS long-term plan aims to have a near immediate effect on provider finances, reducing those reporting deficits by more than 50% in the first year.

The plan insists that no trust or clinical commissioning group should have a deficit by 2023/24 and there will be a multi-pronged approach to reducing deficits. These include:

• Targeting deficits thought a financial recovery fund (FRF)
• Boosting trusts’ potential income by transferring £1bn of the provider sustainability fund (PSF) to the urgent and emergency care tariff – some CQUIN funding (1.25%) will also be transferred into local and national tariffs
• Introducing an accelerated turnaround process for the 30 trusts with the worst financial performance – details are scant, but the plan says these trusts account for the net total of the provider deficit
• Increasing productivity and efficiency.

The £1.05bn FRF is expected to make the biggest immediate impact. In 2019/20, the total will include £200m transferred from the PSF. Payments will be non-recurrent and, in 2019/20, only deficit trusts that have signed up to their control total will be eligible. All trusts in receipt of the funds must produce a multi-year recovery plan during 2019/20, which should be in place from December this year as part of their five-year system-level strategic plans. 

From 2020/21 the fund will be restricted to trusts in deficit with a financial recovery plan that has been agreed with the appropriate NHS England and NHS Improvement regional team. Funding released by over-delivery against the recovery plan will, where possible, be redeployed in transformation and cost reduction. As the number of deficit trusts falls, more of the PSF will be transferred into the financial recovery fund.

The tariff uplift for 2019/20 will be 3.8%, subject to consultation. This includes funding for the Agenda for Change pay rises, but excludes the transfer of £1bn of PSF into urgent and emergency care prices, the CQUIN transfer and funding (£1.25bn per year) for an increase in employer pension contributions.

The transfers out of the PSF mean that in 2019/20 the value of the fund will be reduced from £2.45bn to £1.25bn. A further £155m will be transferred to the non-acute sector and the remaining £1.1bn in the PSF will be allocated to acute and specialist trusts using the same methodology as in 2018/19.

The tariff efficiency factor will be 1.1%, but all trusts with a deficit control total will be required to deliver additional efficiencies of 0.5% – trusts will retain this to support their financial recovery.

According to the long-term plan, the majority of trust leaders (52%) believe that opportunities for greater efficiency remain. Clinically-led improvement programmes, including Getting it right first time, NHS RightCare and Quality Improvement, will
accelerate the removal of unwarranted variation.

In the next two years, the health service will focus on 10 areas to strengthen its efficiency and productivity programme. These areas include: improving the deployment of clinicians, further reducing bank and agency costs; continuing aggregating and standardising procurement, with 80% of NHS supplies bought through Supply Chain Co-ordination Ltd by 2022; introducing pathology and imaging networks; increasing efficiency in primary, mental health and community services; and saving £700m in admin costs by 2023/24 (£290m from commissioners and more than £400m from providers). The savings will be achieved by reducing bureaucracy and automating all core transactional services, including invoice payment processing.

The plan says that over the course of the next five years recurrent efficiency improvements should mean the level of funding in the FRF can be reduced.

NHS Providers chief executive Chris Hopson (pictured) says the planning guidance and the long-term plan help trusts see how they can begin to recover performance, address workforce shortages and move back towards financial balance in 2019/20. ‘The provider sector will welcome the overall new financial regime set out in the guidance,’ he says, ‘[including] the extra investment in the sector, the increase in prices paid to trusts for the care they provide, the new provider financial recovery fund, the changes to funding emergency care and a more realistic efficiency assumption than before of 1.1%.

‘Trusts will want to assess the impact of a complex set of changes on their individual position, recognising that each trust has an important contribution to make to returning the sector to financial balance. But, taken as a whole, this should enable the provider sector to start moving from deficit to surplus, an important and significant achievement.’